John Deere(US:DE) Benzinga·2026-02-20 18:57Core Viewpoint - The global large agriculture industry is facing challenges, but there is a recovery in demand for construction and small agriculture segments, suggesting that 2026 may represent the bottom of the current cycle, providing a foundation for future growth [1] Financial Performance - Deere reported fiscal first-quarter results that exceeded expectations and raised its fiscal 2026 outlook, indicating that the agriculture equipment cycle may be nearing a bottom [2] - Equipment Operations net sales increased by 17.5% year over year, driven by higher shipment volumes and favorable foreign exchange, despite muted pricing [2] - By segment, Production and Precision Ag increased by 3.1%, Small Ag and Turf rose by 24.0%, and Construction and Forestry grew by 33.9%, primarily due to volume and foreign exchange tailwinds [3] Profitability and Margins - Operating margins for Equipment Operations declined by 184 basis points year over year to 5.9%, largely due to tariff impacts, with management expecting about $1.2 billion in direct tariff expenses in fiscal 2026 [4] Outlook and Guidance - Despite headwinds, Deere improved its fiscal 2026 outlook across most of its portfolio, with an estimated $375 million increase in Equipment Operations net income and a $500 million improvement in operating cash flow at the midpoint [5] - The agricultural backdrop is described as steady, with stable global crop production and improving farm income expectations, supported by recent policy and commodity demand signals [6] Inventory and Production Alignment - Dealer inventory drawdowns through 2025 have better aligned production with retail demand, positioning 2026 as a potential cycle trough and 2027 for a healthier recovery if replenishment follows [7] Analyst Sentiment - Analysts have turned more bullish on Deere, with RBC raising its price forecast to $736, UBS increasing its forecast to $775, and Truist Securities raising its forecast to $793 [8]